Exhibit 10.13


 


MEMORANDUM OF UNDERSTANDING BETWEEN


THE NEW YORK CITY DEPARTMENT OF EDUCATION


AS SUCCESSOR IN INTEREST TO


THE BOARD OF EDUCATION OF THE CITY OF NEW YORK,


AND SCHOOL BUS TRANSPORTATION CONTRACTORS


 


RECITALS


 


(a)                                  School
bus transportation services on behalf of the New York City Department of
Education (“DOE”) are provided by contractors (the “Contractors”) pursuant to
industry wide Contracts for Special Education Pupil Transportation Services
(the “Special Education Contracts”) and industry wide Contracts for
Transportation of General Education Pupils (the “General Education Contracts”
and together with the Special Education Contracts, the “Transportation
Contracts”).   The costs for performance
of such contracts, especially in the area of insurance, have increased
dramatically beyond New York and New Jersey regional consumer price index
increments since the catastrophic events of September 11, 2001.


 


(b)                                 The
Transportation Contracts were last amended and extended pursuant to an
Extension and Eleventh Amendment to the Special Education Contracts and an
Extension and Ninth Amendment to the General Education Contracts, both of which
are dated as of September 2000.


 


(c)                                  Each
Contractor provides transportation services pursuant to the Transportation Contracts
by the use of vehicles and spare vehicles as defined in the Transportation
Contracts, which vehicles are owned (or leased) and operated by the Contractors
(the “Contractor Vehicles”).


 


(d)                                 The
Contractors and the DOE have agreed to amend the Transportation Contracts in
order to achieve savings by the Contractors and the DOE for the purposes of
offsetting the


 

















 


extraordinary cost increases which Contractors and the DOE have
experienced in connection with vehicle insurance and other contract requirements.


 


Understanding


 


The DOE and
the Contractors have agreed to enter into a formal, supplemental amendment of
the Transportation Contracts, subject to review and approval by their
respective counsel, and the New York State Education Department (if applicable)
which, will provide for the following:


 


1.                                       Bulk
Purchases.   The DOE shall use its
best efforts as a bulk purchasing agent to make available to the Contractors
fuel, equipment and supplies at prices which shall result in savings to the
Contractors in comparison to prices otherwise payable by the Contractors for
such items.  The Contractors shall use
their best efforts to achieve such cost savings, and shall cooperate with the
DOE as bulk purchasing agent for such purposes.  Such savings shall accrue to the benefit of the Contractors and
the DOE as provided herein (“Bulk Purchasing Savings”).


 


2.                                       Sales
Tax.   The DOE and the Contractors
shall use their best efforts to implement the provisions of the Transportation
Contracts providing for elimination of Contractors’ payment of federal, state
and local sales, excise and use taxes commonly paid by Contractors on purchases
of fuel, equipment and parts (i.e., section (H)(4) of the Special Education
Contracts and section (G)(6) of the General Education Contracts) which will
result in cost savings for the benefit the DOE through modification of
Contractors’ costs in the “Cost Justification” process and as otherwise
provided herein (“Sales Tax Savings”).


 


3.                                       Advance
Payment.   On or about March 5, 2003
(but not later than March 17, 2003) the DOE shall make an advance payment
(“Payment”) to each Contractor (who is a party to this Memorandum of
Understanding) based upon the number of Contractor Vehicles provided


 


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by each Contractor.  The actual
amount of the Payment shall be calculated on a per vehicle basis, and shall
equal $4 million divided by the aggregate number of Contractor Vehicles
provided by all Contractors to the DOE under the Transportation Contracts as of
the date of the Payments.  The Payments
shall be repaid only from the Bulk Purchasing Savings and the Sales Tax Savings
accrued as of June 30, 2004.


 


4.                                       Elimination
of Prompt Payment Discount.   The
DOE shall not receive a 2% prompt payment discount for payment of Contractors’
invoices commencing as of March 1, 2003. 
The DOE shall continue to pay Contractors’ invoices in a timely manner
in accordance with past practices for the balance of the term of the Transportation
Contracts.


 


5.                                       Cost
Justification Simplified.   The
procedures for “Cost Justification” as presently stated in the Transportation
Contracts shall be replaced, subject to the approval of the New York State
Education Department (if applicable), by a simplified form similar in form and content
to the form utilized in the majority of school districts in the State of New
York, a copy of which is annexed hereto and incorporated herein by reference.


 


6.                                       Escort
Fidelity Bond.   The requirement for
a fidelity bond with respect to payment of escort compensation shall be
eliminated.


 


7.                                       Vehicle
Vintage.   The DOE agrees to review
the Vintage equipment requirement contained in the contract and shall consider
proposals to reduce the costs incurred by Contractors arising out of the
vintage requirement.  It is understood
that all proposals to reduce costs must ensure that Contractor vehicles shall
fully comply with and satisfy all U.S. Department of Transportation and N.Y.S.
Department of Transportation requirements.


 


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8.                                       Insurance
Cost Reduction.   The insurance
provisions of the Transportation Contracts shall be amended as follows in order
to achieve Contractor savings in the cost of insurance (“Insurance Cost
Reduction”):


 


(i)                                     Primary
Coverage.   The DOE shall make
available to each Contractor for each Contractor Vehicle, commercial automobile
liability insurance coverage for personal injury and property damage in the
primary amount of $1 million per occurrence as well as no-fault/personal injury
protection insurance and such other vehicle insurance as is required by law,
including, without limitation, Vehicle and Traffic Law § 370 (the “Primary
Insurance”), which coverage shall commence on the earliest date on which the
DOE, with the use of its best efforts, shall be able to implement such coverage
( the “Commencement Date”) and shall continue through the expiration of the
Transportation Contracts (the “Centrally Controlled Insurance Program”).
Participation of each Contractor who enters into this Memorandum of
Understanding in the Centrally Controlled Insurance Program is mandatory.   Such insurance coverage shall be procured
for Contractor Vehicles owned or leased by the Contractors through (i) an
insurance carrier designated by the DOE; (ii) self-insurance provided by the
City of New York (“Self Insurance”); and/or, (iii) such other means as the DOE
reasonably shall determine appropriate, in accordance with the regulations of
the Department of Motor Vehicles and the Department of Insurance of the State
of New York, or pursuant to waiver or amendment of such regulations.  Such Primary Insurance shall provide for
indemnification and defense on behalf of the Contractors, their agents,
servants and employees with respect to 
claims arising out of the operation, maintenance or use of the
Contractor Vehicles  to the extent such
parties would have been protected by an insurance policy with primary limits of
$1 million utilizing ISO Form No. CA0001 (applicable to New York State) and all
mandatory endorsements as required by the New


 


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York Vehicle and Traffic Law, the New York Insurance Law and 11 NYCRR.
In the event such insurance is procured by way of Self Insurance, the DOE shall
indemnify, hold harmless and defend the Contractors, their agents, servants and
employees from any liability arising from the operation, maintenance or use of
the Contractor Vehicles to the same extent such parties would have been
protected by an insurance policy with primary limits of $1 million utilizing
ISO Form No. CA0001 (applicable to New York State) and all mandatory
endorsements as required by the New York Vehicle and Traffic Law, the New York
Insurance Law and 11 NYCRR.  Subject to
the sole and exclusive consent and determination of the administrator of the
Primary Insurance (the “Administrator”), 
Contractors may request designation of defense counsel to defend such
claims provided that such defense counsel shall at all times be subject to the
supervision and direction of the Administrator, shall be experienced in
insurance defense, and shall be engaged in providing insurance defense services
on behalf of insurance carriers admitted in the State of New York.


 


(ii)                                  Consideration.   In consideration of providing such Primary
Insurance, the contract compensation payable to each Contractor under the
Transportation Contracts shall be reduced, for each twelve month period the
Primary Insurance is in effect (a “Primary Policy Year”),  in an amount equal to (x) the annualized
premium per Contractor Vehicle payable by such Contractor for the first $1
million in coverage, under the 
automobile liability insurance policy in place prior to March 1, 2003
(the “Current Policy”);  less (y) the
amount of $2,000.00 per Contractor Vehicle multiplied by (z) the total number
of Contractor Vehicles for such Contractor (the “Contract Reduction
Amount”).  The amount of such contract
reduction shall be withheld in twelve equal installments from monthly billing
due to the Contractor.  In the event
that a Contractor’s Current Policy does not clearly define the amount of
premium payable for


 


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such coverage, the amount of such premium shall be calculated, by
reference to such insurance policy, by a national insurance brokerage company
mutually agreeable to the DOE and to the Contractors.  The Primary Insurance provided herein shall not be extended
beyond the expiration date of the Transportation Contracts.  In the event such limitation shall result in
the issuance of Primary Insurance for less than a Primary Policy Year, the
Contract Reduction Amount shall be prorated accordingly.


 


(iii)                               Excess
Coverage.   At the election of the
DOE, all Contractors may be required to purchase the contractually required
excess insurance (“Contract Excess Coverage”) through the DOE’s Centrally
Controlled Insurance Program, provided the cost of such excess insurance shall
not exceed the cost of similar excess insurance then available to a Contractor
(“Market Cost of Insurance”).  Otherwise,
the Contractors shall provide the Contract Excess Coverage.  In the event the Market Cost of Insurance
for a Contractor shall be greater than the cost of insurance charged by the DOE
for Contract Excess Coverage the Contractor shall pay such excess amount to the
DOE to the extent of the Payments and Additional Payments made to the
Contractor.


 


(iv)     Alternate to Primary Coverage.   (a) In the event that the DOE shall not
provide the Primary Insurance to Contractors as set forth herein by March 1,
2003, the DOE shall make additional advance payments (“Additional
Payments”)  to each Contractor who is a
party to this Memorandum of Understanding, commencing March 1, 2003 at the rate
of $83.33 per Contractor Vehicle and at the rate of $166.66 per Contractor
Vehicle per month commencing April 1, 2003 and each month thereafter until the
Commencement Date, which Additional Payments shall be repaid only from the Bulk
Purchasing Savings and the Sales Tax Savings accrued through the expiration
date of the Transportation Contracts.


 


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(b)                                 The
Additional Payments shall not commence with respect to a Contractor unless and
until such Contractor has substantially and materially complied with the
information requested by the DOE for insurance purposes as described in
Attachment A  annexed hereto (the
“Insurance Information”).   Contractors
who are unable to obtain loss history information from prior insurance carriers
who have been declared insolvent (and are no longer in business) shall be
excused from compliance to the extent such information is not otherwise
available.  As a condition for making
the Additional Payments commencing March 1, 2003, a Contractor must provide the
DOE with  the Insurance Information described
in Attachment A on or before February 19, 2003.  In the event a Contractor fails to do so, the Additional Payments
shall commence April 1, 2003 subject to the delivery of the Insurance
Information to the DOE on or before the first business day of March 2003.  Upon failure to do so, the Additional
Payments shall only commence as of the first day of the next month (or the
first day of a following month, as the case may be) provided the Insurance
Information has been delivered to the DOE at least 25 days prior thereto.


 


(v)                               Each
Contractor shall have a continuing obligation to use its best efforts to
cooperate with the Loss Prevention Program established by the DOE or its agent
to ensure maximum cost containment.


 


(vi)                              Notwithstanding
anything to the contrary in this Memorandum of Understanding, it is the
intention of the parties that the DOE’s obligation with respect to Insurance
Cost Reduction is limited to a reduction of $2,000.00 per Contractor Vehicle
per Primary Policy Year (pro-rated in the event a Primary Policy Year shall be
reduced to less than twelve months).  
No demand or claim may be made by any Contractor for Insurance Cost


 


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Reduction
which would increase the said DOE obligation to more than $2,000.00 per
Contractor Vehicle per Primary Policy Year.


 


9.                                     Condition
Precedent.   In the event that prior
to the date of execution of a formal contract amendment as provided herein; (i)
there shall be an industry wide work stoppage or strike by the members of Local
1181 A.T.U. (ii) the Contractors and Local 1181 A.T.U. shall fail to enter into
a collective bargaining agreement; or (iii) Contractors who have filed a
petition under Chapter 11 of the Bankruptcy Code, shall fail to assume the
Transportation Contracts in such proceedings, then this Memorandum of
Understanding shall be of no further force or effect.


 


10.                                 Termination
of Litigation.   The DOE,
Contractors and their affiliates, upon execution of a formal contract
amendment, shall (a) enter into a stipulation of discontinuance and shall take
such other steps as shall be necessary to terminate the litigation with
prejudice pending in Supreme Court, New York County under the caption Metro
Affiliates, Inc., et al. v. Harold Levy as Chancellor of the Board of Education
of the City of New York, et al., Index No. 602030/02; and (b) enter into a
stipulation withdrawing the motion for an order authorizing the Debtors to
reject the escort services portion of the Transportation Contracts in the
bankruptcy proceeding entitled In re: Metro Affiliates, Inc., Case No.
02-42560,  presently pending in the
Bankruptcy Court of the Southern District of New York.


 


11.                                 Formal
Amendment.   The foregoing
constitutes the substance of the agreement between the DOE and the Contractors
who are signatories to this Memorandum of Understanding.  The parties hereto agree to enter into a
formal amendment of the Transportation Contracts incorporating the terms
herein, which amendment shall be subject to the approval of their respective
counsel as to form and the approval of the New York State Department of
Education.   This agreement is not
effective  unless Contractors, who
collectively represent at


 


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least 94% of the Contractor Vehicles under the Transportation
Contracts, execute the same and an original signed copy is returned to the DOE
on or before March 3, 2003.


 


12.                                 Execution
in Counterparts.   This Memorandum
of Understanding may be executed in two (2) or more counterparts, and with
counterpart signature pages, each of which shall be deemed an original, and all
of such counterparts together constitute but one (1) and the same agreement.
One (1) or more counterparts may be delivered by facsimile with the same force
and effect as an original.


 


IN WITNESS
WHEREOF, this Memorandum of Understanding has been executed as of the 27th day
of February 2003.


 


 


	
   

  	
   

  	
   

  	
   

  	
   

  	
  Department
  of Education of the

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  City of New
  York

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ KATHLEEN
  GRIMM

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Amboy Bus Co.,
  Inc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ DOMENIC
  GATTO

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Domenic
  Gatto

  
									



 


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  Staten
  Island Bus Company

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ DOMENIC
  GATTO

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Domenic
  Gatto

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
									



 


 


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